The transportation industry is a significant contributor to an economy’s growth. In the US, the transportation industry is entering into a new year that has the potential to be even stronger than the previous one. There is an increasing demand for shippers globally, especially from e-commerce companies. This means that more opportunities are going to open for players in freight transportation. Companies in freight transportation will have ample opportunities in 2018 to take advantage of the high demand for shippers. Furthermore, declining profit margins and the demand for scalable technology will result in more carriers using digital channels to sell their product directly to shippers. Here are four trends in the freight transportation industry that you can expect to see this year.
Evolution of Technology
As the years go by, players in the freight transportation industry are embracing newer technologies. In fact, Uber Freight, which launched last year is an app for freight that operates like Uber’s ride-sharing service. Both Convoy and Amazon have apps that target on-demand freight, as well. These apps operate by matching trucking companies with shippers who have freight that needs to move. Another potential disruptor is the autonomous vehicle boom. Tesla has already unveiled their electric semi-truck, which has a range of 500 miles on one charge. This seems highly promising and as per reports, the pre-orders are piling in from large asset companies, which clearly indicates the growing popularity of this technology.
In the freight transportation industry, there is low truck supply and high freight demand. One of the reasons for tightened capacity is the ongoing driver shortage. Year after year, older drivers are retiring with fewer younger drivers replacing them. Furthermore, the work is difficult as it involves driving long distances, long working hours, being away from family for long periods of time, and less-than-ideal pay. Another factor that is impacting capacity is the increasing government regulations such as the electronic logging devices mandate. The ELD mandate requires all motor carriers to install electronic devices in their trucks that will automatically track drivers’ hours of service. Most smaller carriers have become compliant, but some are having issues with the cost of installing the devices and even more dislike the automatic tracking of their movements.
Mobile technology will be central to trends in the freight transportation industry in 2018. Truckers will begin using more technology in the cab which will result in reduced delays associated with routing while reducing the amount of work required by truckers. Automating the process will reduce the amount of time drivers spend waiting at yard gates, for unloading or loading processes. Through mobile technology, drivers can receive real-time updates, avoid accidental violations of hours of service requirements, monitor fuel costs and track maintenance and simplify other processes along the way.
Skyrocketing Spot Rates
Spot rates were already on the rise in 2017 and are expected to do so throughout 2018 as well. This trend goes hand in hand with the capacity crunch. The rise in freight demand and reduced supply (available trucks) causes rates to rise. There are mainly two types of rates in the transportation industry – spot market rates and contract rates. Spot rates are those that are quoted on the spot and are typically done for freight that is ready to move. Contract rates refer to the ones that are locked in with a carrier via a contract with the shipper and are usually based on a year-long estimate of freight volume. The likely outcome of increased truck rates will be the transition from highway transport to rail freight.
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